What risk does the firm face and how could it hedge this, Financial Management

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What risk does the firm face and how could it hedge this

Suppose that today your firm borrows $20 million for 10 years by issuing (selling) one-year bonds that pay today’s one-year Treasury bill rate plus 3%. The firm will then issue new one-year bonds each of the next none years. Today it also loans the $20 million for 10 years at a fixed rate of 8%. What risk does the firm face and how could it hedge this risk with an interest rate swap? Give an example of the terms of a swap that the firm might accept?

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Financial Management: What risk does the firm face and how could it hedge this

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